Exact Likelihood Inference in Group Interaction Network Models

Grant Hillier and Federico Martellosio
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Grant Hillier: CeMMAP and University of Southampton
Federico Martellosio: University of Surrey

No 816, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: The paper studies spatial autoregressive models with group interaction structure, focussing on estimation and inference for the spatial autoregressive parameter \lambda. The quasi-maximum likelihood estimator for \lambda usually cannot be written in closed form, but using an exact result obtained earlier by the authors for its distribution function, we are able to provide a complete analysis of the properties of the estimator, and exact inference that can be based on it, in models that are balanced. This is presented rst for the so-called pure model, with no regression component, but is also extended to some special cases of the more general model. We then study the much more dicult case of unbalanced models, giving analogues of some, but by no means all, of the results obtained for the balanced case earlier. In both balanced and unbalanced models, results obtained for the pure model generalize immediately to the model with group-specific regression components.

Pages: 50 pages
Date: 2016-05
New Economics Papers: this item is included in nep-ecm, nep-sog and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0816

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